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Over‐Reactions In Us Agricultural Commodity Prices

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  • M. T. Allen
  • C. K. Ma
  • R. D. Pace

Abstract

The purpose of this paper is to test rationality in agricultural commodity markets. We investigate the price‐adjustment process after significant events using abnormally large cash commodity price changes as proxies for the arrivals of significant events in the markets. The evidence suggests that market rationality is violated. Generally, agricultural commodity prices tend to reverse after significant events. This is consistent with the over‐reaction hypothesis which maintains that traders in spot commodity markets over‐weight more recent information and under‐weight prior information in their expectations.

Suggested Citation

  • M. T. Allen & C. K. Ma & R. D. Pace, 1994. "Over‐Reactions In Us Agricultural Commodity Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(2), pages 240-251, May.
    • Handle: RePEc:bla:jageco:v:45:y:1994:i:2:p:240-251
    DOI: 10.1111/j.1477-9552.1994.tb00398.x
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    References listed on IDEAS

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    Cited by:

    1. Ott, Herve, 2012. "Which factors drive which volatility in the grain sector?," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122486, European Association of Agricultural Economists.
    2. Chad E. Hart & Sergio H. Lence & Dermot J. Hayes & Na Jin, 2016. "Price Mean Reversion, Seasonality, and Options Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 707-725.
    3. Na Jin & Sergio Lence & Chad Hart & Dermot Hayes, 2012. "The Long-Term Structure of Commodity Futures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 718-735.
    4. Canali, Gabriele, 1997. "The evolution of food distribution system and its implications on the marketing of typical products," 52nd Seminar, June 19-21, 1997, Parma, Italy 231285, European Association of Agricultural Economists.
    5. Li, Lisha, 2015. "Three essays on crop yield, crop insurance and climate change," ISU General Staff Papers 201501010800005371, Iowa State University, Department of Economics.
    6. Aviral Kumar Tiwari & Aruna Kumar Dash & Subhendu Dutta, 2015. "Testing the mean reversion in prices of agricultural commodities in India," Economics Bulletin, AccessEcon, vol. 35(3), pages 1928-1940.
    7. Hervé Ott, 2014. "Extent and possible causes of intrayear agricultural commodity price volatility," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 225-252, March.
    8. Kevin D. Welch & Daniel Cook & Benedict T. Green & Dale R. Gardner & James A. Pfister & Tara G. McDaneld & Kip E. Panter, 2015. "Adverse Effects of Larkspur ( Delphinium spp.) on Cattle," Agriculture, MDPI, vol. 5(3), pages 1-19, July.
    9. Carter, Colin A., 1999. "Commodity futures markets: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(2), pages 1-39, June.
    10. François Gastal & Gilles Lemaire, 2015. "Defoliation, Shoot Plasticity, Sward Structure and Herbage Utilization in Pasture: Review of the Underlying Ecophysiological Processes," Agriculture, MDPI, vol. 5(4), pages 1-26, November.

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